Inflation

[mullokintyre]

Michele needs to be careful, she is speaking outside the narrative, Phil Lowe did that and look what happened to him.

She probably feels pretty safe, at least for now.
Lowe's mistakes can be sheeted back to his choice by the LNP.
They can't kill her off too quickly, to lose one RBA head is unofrtunate, to lose two smacks of a lack of capability in the selection process.
Mick

 

[Smurf1976]

Now don't get me wrong, most rules exist for a damn good reason, but if someone with several decades' experience/knowledge is telling you that the rule is wrong, you should listen to them.

I could go into examples but in short the basic problem is a "big and dumb" approach is being applied.

Rather than being smart, rather than working things out how to do them well, we're just taking this brute force approach.

Roads are a great example of that. Australia did a lot of "smart" stuff early this century and was somewhat of a world leader in many aspects of it but has now gone back to brute force "big build" approaches. It gets the job done but it's serious $ billions. For some of that, far cheaper but smarter alternatives exist that would be more than adequate if pursued.

In investing terms it's the equivalent of a fund manager deciding to sack their entire team of analysts and traders because they've adopted a new standard of just holding cash instead, this being simpler, easier and avoiding risk. It gets rid of volatility, gets rid of all that uncertainty, gets rid of the need for all that intellectual stuff and no problem since it's customers who take the loss. Managers still get paid their bonus since that's based on risk not profit.

Trouble is, it leads to chronic long term underperformance and that's what we now have, entrenched low productivity that isn't due to laziness but due to doing things in ways that just aren't efficient.

 

[over9k]

the vast majority of the workforce (especially in transaction roles) dont understand the why behind why they actually do something.

This is also a serious issue. It comes from rote learning. Raw memorisation of information. Knowing the dots without being able to connect them.

Good exams/tests expose this but then fewer people would pass/qualify and we can't have that can we?

 

[over9k]

PPI numbers come in good. Markets show some hesitant green. Lots of data dropping this week.

 

[over9k]

Dip buying degenerates now out in full force. SOX the most responsive. CPI drops tomorrow.

 

[waterbottle]

RBNZ unexpectedly cuts 25bps, cites weakening economy...

 

[divs4ever]

well they did admit they are in a recession ( unlike some )

cheers

 

[over9k]

Aus inflation comes in at 3.5%. FMG misses profit estimates due to "increased costs".

 

[mullokintyre]

Inflation comes in at 3.5% thanks to energy rebates.
I fail to understand how the government giving money to citizens to help with energy bills somehow reduces inflation.

For those Busineses that do not qualify for the small business rebate, the costs are still going up.
And of course, the threshold for a busiess to receive the rabate varies from state to state.


And how long will the rebates last?
One year, two years. forever?
The market has seen through this crap, and immediately boosted the AUD/USD pair so that it went through the 68 cent barrier.
Mick

 

[TimeISmoney]

And how long will the rebates last?
One year, two years. forever?

Mick

Until the next federal elections.

 

[JohnDe]

Inflation comes in at 3.5% thanks to energy rebates.
I fail to understand how the government giving money to citizens to help with energy bills somehow reduces inflation.

For those Busineses that do not qualify for the small business rebate, the costs are still going up.
And of course, the threshold for a busiess to receive the rabate varies from state to state.

View attachment 183296
And how long will the rebates last?
One year, two years. forever?
The market has seen through this crap, and immediately boosted the AUD/USD pair so that it went through the 68 cent barrier.
Mick

Smoke and mirrors by governments planning their next election strategy.

How many voters on the government welfare teat? Too many.

 

[mullokintyre]

Inflation comes in at 3.5% thanks to energy rebates.
I fail to understand how the government giving money to citizens to help with energy bills somehow reduces inflation.

For those Busineses that do not qualify for the small business rebate, the costs are still going up.
And of course, the threshold for a busiess to receive the rabate varies from state to state.

View attachment 183296
And how long will the rebates last?
One year, two years. forever?
The market has seen through this crap, and immediately boosted the AUD/USD pair so that it went through the 68 cent barrier.
Mick

Here is a representation of the electricity prices with and without the subsidies.

Mick

 

[Knobby22]

Here is a representation of the electricity prices with and without the subsidies.

Mick

View attachment 183318

The subsidies are real, the effect on inflation is real. The month on month inflation rate was 0%. The dollar went up and then dropped back when this was realised.

 

[over9k]

For clarification, this is an excellent example of my previous posts re: interest rate rises being a very blunt instrument and actually reducing supply somewhat as well.

Previously, if you could borrow the money at, say, 1%, then if you had an investment in zinc that was going to yield you, say, 5%, then the investment makes sense and would go ahead and thus increase the supply of zinc.

But if you can yield 6% just sticking the money in the bank then investing it in a zinc factory would be moronic. Even if the yield was the same, the return in a savings account (so to speak) is risk free, so you still wouldn't do it.

It's in this way that while a rate rise will reduce demand for stuff, it also makes at least some supply side investments no longer viable even if we assumed demand for the product remained the same.

It's in this way that you can see how a supply side restriction is basically the nightmare scenario for policy makers because the only way to improve it via monetary policy is to keep interest rates low enough for, say, a new zinc factory to be viable, and that means that your demand side remains too high.

The only way to fix it is with some kind of subsidisation and that money has to come from the tax pool, so either taxes increase and everybody gets pinched that way or they're diverted from something else the government is funding and that goes (or has to be paid for out of your own pocket) instead.

The only other option is for the government to borrow the money to fund the subsidies (like it's been doing for 15 years) and that particular piper must be paid eventually.

Just quoting this post re: the discussion around electricity subsidies

 

[Value Hunter]

As for what over9k said I largely agree, and actually its a Neo-keynesian fallacy that interest rates are the main factor in controlling inflation with higher interest rates equaling lower inflation and lower interest rates bringing higher inflation. The empirical evidence does not support this idea nor does simple logic. As you pointed out raising interest rates raises the cost of capital for businesses which makes investment less attractive compared to the risk free rate and at the same time increases the cost of borrowing due to higher interest costs which means that fewer new investments are viable. Also business eventually tend to pass cost increases on to consumers. Just like if electricity prices rise or cost of goods sold rise businesses will pass that additional cost onto consumers in the same way if a company is now paying more interest on its loan to the bank due to higher interest rates it will also try to pass that cost onto consumers hence its inflationary.

Yes obviously rising interest rates lessens appetite for borrowing and destroys demand and so its a tug of war between the forces I explained above and this and its not always clear which was the tug of war will end despite central banks believing that higher interest are always dis-inflationary.

If you want to stop inflation you need to stop the money printing and move to a hard money standard (gold, bitcoin, etc). Also economic and tax reforms need to be implemented to encourage higher supply of goods and services.

 

[Value Hunter]

Also I disagree with the RBA that wage increases are a problem they are just playing catch up for the many years in recent history when wages rose slower than inflation.

 

[Smurf1976]

Here is a representation of the electricity prices with and without the subsidies.

Households and small business are both now being directly subsidised.

Just my view but I think it's only a matter of time until we go down the track of subsidies to big business and in particular manufacturing, refining, smelting etc.

The idea of free trade etc seems dead in all but name at this point. Canada jus put a 100% tariff on Chinese electric cars as one random example but I do think it's only a matter of time until we see more direct forms of industry assistance in Australia.

Certainly there's some planning going on which does basically assume Australia's re-industrialising no matter what and the questions are about the detail.

 

[over9k]

"China demand problems persist"

 

[over9k]

 

[divs4ever]

hmmm

the official Government propaganda outlet ( because THAT is precisely what the ABC is , and left-leaning friendly by staffing selection )

is resorting to 'trickle truth , many should be VERY worried